You should try licecap. I've suggested it before to someone else, it works super well, and gives high quality gifs. But keep mind that any gif longer than 5-10 seconds, will be 2-3 Mb or more, but it's a trade off for nice high quality non-grainy gifs.
Also, good job on this project. We're doing similar things, as I have a Zelda Gamekit in progress (link in my sig), so you can check that out too. Feel free to ask me for help, as I've gotten a lot of features implemented and can provide input on how to approach things.
Thanks, I will check licecap out!
I skimmed your thread, I'll be interested to look at it further when I get home (at work now) and look at some of the videos. Do you have any playable/demo links of the mechanics or any capx links? And where did you get the art assets from?
I hope to work on it a little further this weekend. I want to add another enemy or two (need to do art and AI), add money/rupees to drops and a little shop, and make the world a lot bigger. Maybe add an entrance to a dungeon/castle (won't get to the actual dungeon yet). I'm attempting to make everything a little different so it is somewhat original. This probably won't turn into a game but wouldn't mind doing something similar sometime. So will try to keep up with your post as much as I can remember to.
Also, if anyone wants to see the capx or wants to know how to do something specifically I'm keeping no secrets. As people have already pointed out its not bug-free though.